Salary growth differences in the Baltic States

According to the biggest remuneration survey in the Baltics, conducted by Baltic Salary Survey, this year the highest salary growth was recorded in Estonia. Lithuania and Latvia were not far behind, states the company’s press release.

“After surveying 850 companies and examining changes in remuneration, we can conclude that the monthly salary before taxes this year in Lithuania grew for 81.8% of the surveyed employees and, on average, increased by 7.7%, while the annual salary, including the bonuses – by 10.5%. From a purely statistical standpoint, Latvia slightly overtook us – there was a higher increase in the annual remuneration there, but, as in Estonia, a smaller number of employees experienced it”, – says Povilas Blusius, a representative of BSS and adds, that these general growth trends are often a good reflection of the general economic health of the country, but various other and more precise indicators should be used when discussing the real increase in compensation levels.

Fastest growth recorded in Estonia

Even though in Latvia and Estonia the proportions of employees that experienced the salary growth were lower than in Lithuania, the increases were higher. In Latvia, 71% of the surveyed employees received higher annual salaries compared to last year’s, with an average increase of 11%. In Estonia, remuneration grew for 73% of the incumbents and, on average, increased by 13%.

The general salary growth trends can be strongly influenced by the changes in the sample of the surveyed employees. As more and more organizations participate in the survey each year, the sample changes, which can often dilute the statistics. Because of that, Baltic Salary Survey also calculates the changes for the so-called unchanged sample. Such sample includes those employees who have not changed their position during this year and did not receive promotions. The annual salary in Lithuania for the unchanged sample increased by 8.8%, also, the payout of bonuses was more popular here than in other Baltic countries. In neighbouring Latvia, the growth of annual remuneration for the unchanged sample was much lower, only 3.6%. Estonia is leading the way in this regard as well, the growth of monthly salary for the same sample was 6%, annual – 9%.

According to the compensation research specialist, such tendencies often depend or coincide with the general economic indicators of the country. Inflation or GDP growth, their forecasts, the monetary policy or the prevailing market sentiments – often are either the causes or effects of salary changes. For example, predictions about the upcoming economic crisis discourage businesses from hiring new workers or investing in the existing ones. The most dominant and fastest-growing sectors of the country, such as IT, construction or pharmaceuticals, can also have a much higher impact on the general statistics and overshadow more subtle changes.

The biggest tax burden falls on the Latvian employees

When comparing remuneration growth, it is important to consider the different tax systems in these countries. In Latvia, employees pay the largest part of their wages in taxes – 31 or 34 per cent, which can increase to 42.4 per cent for high-earners. Meanwhile, in Lithuania, there is a constant 24% tax tariff, therefore, even with the higher salary growth in Latvia, after the taxation, the employees might have the same or even lower increase. In Estonia, the tax rate is slightly lower than in Lithuania – 23.6%, making it the cheapest in the Baltic States.

IT sector the most competitive salaries

According to the research, in all three Baltic States, no matter the level of the position, IT specialists of various kinds remain among the best-paid professionals. The opposite is true with retail specialists – market indexes for this sector are among the lowest, meaning that employees earn lower than the market average.

This year, the highest growth of compensation was recorded in senior engineering positions, as well as in risk management. Rapid remuneration growth was not exclusive to these positions as some of the already competitive IT position saw significant increases – a large part of the organizations upped the monthly salaries of their information security specialists by nearly 14%. Meanwhile, salaries in retail sector stagnated. Some retail companies have successfully implemented new remuneration policies that, with a subsequent increase in bonus payouts, pushed the growth of the annual salary to about 2%.

According to the compensation specialists, wage growth usually reflects the demand for specialists of the specific profession. With the steady and consistent salary growth, system analysts continue to be among the most desired specialists in the Baltic States.